CMS Implements 2026 Home Health Medicare Payment Update with 1.3% Aggregate Reduction

Medicare Home Health payments See Reduced cuts for 2026, But Concerns Remain

Washington D.C. – November 29, 2025 – The U.S. Centers for Medicare & Medicaid Services (CMS) released its final payment rule for home health services in calendar year 2026 on Friday, revealing a smaller-than-proposed cut to Medicare payments. While initially slated for a 6.4% aggregate reduction, the final rule now estimates a decrease of 1.3%, or $220 million, compared to 2025. This translates to approximately $915 million more in payments for home health providers next year.

The revised rule includes a 2.4% rate increase, partially offset by a 0.9% permanent adjustment and a 2.7% temporary adjustment designed to mitigate a larger single-year reduction. A further 0.1% decrease is attributed to updates in outlier payments.The permanent adjustment related to Patient-driven Groupings Model (PDGM) behavior changes has been finalized at -1.023%, modified from the initial proposal after industry feedback highlighted factors beyond PDGM implementation influencing behavior, such as the OASIS-E assessment and medicare Advantage expansion.

Despite the improvement,industry leaders express ongoing concern. Dr. Steve Landers, CEO of the National alliance for Care at Home, warned that the 1.3% cut “will likely result in continued reductions in patient access, the closure of more home health agencies, and more patients waiting in costly hospital settings instead of recovering safely at home.”

This marks the fourth consecutive year of permanent cuts to Medicare home health payments. While 2024 saw a net aggregate payment increase of 0.5%, the underlying baseline cuts amounted to a -1.975% permanent projected adjustment. The proposed rule for 2026 initially included a drastic 9% reduction in the 30-day base payment rate – the largest cut ever proposed.

the delayed release of the rule,significantly later than the typical late October/early November timeframe,was attributed to the recent 43-day government shutdown.

“to meet [rising] demand,payment support is critical,” stated Katie Smith Sloan,president and CEO of LeadingAge,acknowledging the rule as “an improvement over past actions.” Though, the long-term sustainability of home health services remains a key concern as the industry navigates ongoing payment pressures.

How will the refinements to the case-mix adjustment methodology, specifically the functional qualifying threshold (FQT) and comorbidity adjustment, likely impact reimbursement rates for agencies serving patients with complex needs?

understanding the 2026 Home Health Rule & Payment Changes

The Centers for Medicare & Medicaid Services (CMS) has finalized its 2026 Home Health Prospective Payment System (HH PPS) rule, implementing an aggregate 1.3% reduction in Medicare payments for home health agencies (HHAs). This change, impacting Medicare home health benefits, necessitates a thorough understanding for agencies to navigate the evolving landscape of home healthcare reimbursement. The final rule builds upon proposed changes and addresses key areas impacting home health agencies and patient care.

Key Components of the 2026 HH PPS Final Rule

Several elements contribute to the overall 1.3% reduction.Hear’s a breakdown:

* Case-Mix Adjustment: CMS is refining the case-mix adjustment methodology, which determines payment based on patient characteristics and needs. This includes adjustments to the functional qualifying threshold (FQT) and comorbidity adjustment.

* Patient-Driven Payment Model (PDPM) Updates: While PDPM remains the core payment model,CMS continues to make refinements. These adjustments aim to more accurately reflect the resources used to care for patients in their homes.

* Home Health Value-Based Purchasing (HHVBP) Program: The HHVBP program continues to expand, linking payment to quality performance. Agencies will be evaluated on a set of quality measures, impacting their reimbursement rates.

* Low Utilization Payment Adjustment (LUPA): CMS has made adjustments to the LUPA thresholds, affecting payments for low-utilization episodes.

* Wage Index Updates: The rule incorporates updated wage index data, which can impact payments based on geographic location.

Impact on Home Health Agencies: A Detailed Look

The 1.3% aggregate reduction will require HHAs to proactively adapt their operations. Here’s how:

1. Revenue Cycle Management: Strengthen revenue cycle management processes to ensure accurate coding, billing, and claim submission. Minimize denials and maximize appropriate reimbursement.
2. Cost Containment: Identify areas for cost reduction without compromising quality of care. This may involve streamlining processes, negotiating vendor contracts, and optimizing staffing models.
3. focus on Quality: Prioritize performance on HHVBP measures. Invest in quality improvement initiatives to enhance patient outcomes and achieve higher scores.
4. PDPM Optimization: Ensure accurate patient assessment and coding under PDPM. Proper documentation is crucial for capturing the appropriate level of reimbursement.
5. Staff Training: Provide ongoing training to staff on coding changes, documentation requirements, and quality reporting.

Navigating the PDPM Refinements

The ongoing refinements to PDPM require continuous attention. Key areas to focus on include:

* Functional impairment: Accurate assessment of functional limitations is critical for determining the appropriate payment level.

* Comorbidities: Properly documenting comorbidities can increase reimbursement. Ensure all relevant conditions are accurately captured.

* Clinical groupings: understanding how clinical groupings impact payment is essential for optimizing reimbursement.

The Role of Home Health Value-Based Purchasing (HHVBP)

The HHVBP program is becoming increasingly vital. Agencies should:

* Monitor Performance: Regularly track performance on HHVBP measures.

* Identify Gaps: Identify areas where performance is lagging and develop targeted improvement plans.

* Data Submission: Ensure accurate and timely submission of quality data.

* Benchmarking: Compare performance against peers to identify best practices.

preparing for the Wage Index Updates

The updated wage index can significantly impact reimbursement. Agencies should:

* Review Wage Data: Analyze the updated wage index data for their geographic area.

* Budgeting: Adjust budgets to reflect the potential impact of wage index changes.

* Staffing Models: Evaluate staffing models to ensure cost-effectiveness.

practical Tips for Success in 2026

* Invest in Technology: Implement technology solutions to automate processes, improve documentation, and enhance data analysis. Home health software can be a game-changer.

* Data Analytics: Leverage data analytics to identify trends, track performance, and make informed decisions.

* Compliance: Maintain strict compliance with all Medicare regulations.

* Stay Informed: Continuously monitor CMS updates and guidance. Subscribe to industry newsletters and attend relevant webinars.

* Seek Expert Advice: Consult with home health consulting professionals for guidance on navigating the changes.

Real-world Example: Agency Adaptation

A medium-sized home health agency in rural Ohio proactively addressed the 2024 HH PPS changes (similar principles apply to 2026) by implementing a new electronic health record (EHR) system with integrated coding and billing tools. This resulted in a